Morgan Stanley Broker Shawn Good Pleads Guilty
Published On: October 6, 2022

Stoltmann Law Offices has represented victims of Ponzi schemes for almost twenty years. Recently, a former Morgan Stanley broker, Shawn Edward Good of Wilmington, North Carolina, pleaded guilty for his involvement in a $7.2 million Ponzi scheme in which he defrauded at least a dozen clients, according to the Justice Department.

 “This investment advisor breached the trust of at least a dozen clients, taking over $7 million – money he promised would go to low-risk investments – and used it to line his pockets, buying real estate, luxury cars, and vacations,” said U.S. Attorney Michael Easley.  “This decade-long scam has finally come to an end.”   Good faces up to three years in prison.

According to court documents, Good was employed as a registered representative and investment advisor for Morgan Stanley Smith Barney, LLC in Wilmington.  “From 2012 to February 2022, Good executed a scheme to obtain money through investment fraud, commonly known as a Ponzi scheme. Specifically, Good solicited investments from business clients and others for purported real estate projects and tax-free municipal bonds, touting these opportunities as low-risk investments that would pay returns of between 6% and 10% over three- or six-month terms.”

Good’s scheme involved asking clients to obtain a liquid asset line of credit (LAL) secured by their Morgan Stanley investment or retirement accounts. “Good then directed clients to transfer the LAL funds to their personal bank accounts and then wire the funds directly to Good’s personal bank account.  Other victims paid Good by paper check and wire transfers using funds derived from sources other than Morgan Stanley accounts.”

Setting up a classic Ponzi scheme, instead of investing in land development or high-yield  bonds, “Good used the money for personal expenditures including his Wilmington residence; a condominium in Florida; luxury vehicles including a Mercedes Benz, a Porsche Boxster, a Tesla Model 3, an Alpha Romeo Stelvio, and a Lexus RX350; fine dining; and vacations to Paris, France; Cinca Terra, Italy; Jackson, Wyoming; Las Vegas, Nevada; and other destinations.  To lend credibility to the Ponzi scheme and to elude detection, Good also used a portion of investor funds to make payments to earlier investors.”

Like all Ponzi schemes, the pitch to investors was too good to be true. Quick, easy, above-market yields were promised, although investors’ money was never invested. Client funds were then pilfered by the broker or used to pay initial investors.

“High yield investment fraud schemes are designed to appeal to people’s hope that ‘you can get something for nothing,’ often resulting in the total loss of the investment,” said Donald Eakins, IRS Criminal Investigation Special Agent who was involved in the Good case.

Brokerage firms are legally required by FINRA to supervise their broker’s activities and in the event the firm is negligent or fails to adequately supervise, the firm can be liable to the victims.  Further, in situations like this, the firm can also be liable as a result of the conduct of their agent through the doctrine of apparent agency.  Investors can file FINRA arbitration complaints if these rules are broken.

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!

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